New Indian Govt. Eases Standards on Company Blacklisting

Jun. 30, 2014 - 03:52PM
|

Banned: South African company Denel — charged with bribing Indian officials to improve its chances of winning a 2005 competition to provide 155mm artillery guns like this one to the Indian Army — is one of several companies blacklisted by India in recent years. (Denel)

NEW DELHI — India’s newly elected government will not cancel defense contracts or blacklist overseas defense companies until charges leveled against them are proved by the Central Bureau of Investigation (CBI), a Defence Ministry source said.

That decision came in the form of a directive from Indian Defence Minister Arun Jaitley during a recent meeting of senior MoD officials.

Between 2005 and 2009, the ousted United Progressive Alliance government had barred Singapore Technologies Kinetics, Israel Military Industries (IMI), Zurich-based Rheinmetall Air Defense, Corporation Defense Russia and South African company Denel from doing defense business in India for the next 10 years.

While the CBI recommended barring these companies, none of the charges that they received kickbacks have been proved.

Even the chiefs of the Indian Army, Air Force and Navy who had met Jaitley criticized the blanket blacklisting and cancellation of orders of some overseas defense companies, the MoD source added.

In addition to blacklisting, outgoing Defence Minister A.K. Antony had sent about 100 complaints to the investigating agencies.

A majority of the charges against overseas defense companies were leveled by competitors during the procurement process, and Antony would halt the entire program and forward the complaints to the investigating agencies, the MoD source said.

“There will be no immediate impact on any ongoing weapons procurement program due to the directive by the new government not to rush to blacklist overseas defense companies,” said Nitin Mehta, a defense analyst based here.

A New Delhi-based executive of an overseas defense company said that “overseas companies are greatly relieved from the threat of being blacklisted.”

The MoD is identifying measures that can be initiated in the next few months to remove bottlenecks in weapon procurement and boost defense preparedness. The exercise is being undertaken by the ministry at the directive of the prime minister’s office, the source added.

In addition to the decision about blacklisting companies, the MoD is considering what kind of inducements to offer — possibly in the form of tax incentives — to encourage overseas defense companies to bring sophisticated technology into tie-ups with domestic defense companies, the sources said.

The prime minister’s office has also asked the MoD to make a list of defense projects that have been pending for more than five years.

Blacklisting has contributed to shortages of ammunition and affected the purchase of a variety of howitzers.

In 2009, IMI won a $300 million contract to build a chain of ordnance factories in the state of Bihar to manufacture ammunition for Bofors 155mm guns — until blacklisting halted the program.

The blacklisting of Rheinmetall led to cancellation of the tender for wheeled 155mm/52 caliber guns for Indian Army artillery, in which Konstrukta of Slovakia and Rheinmetall of Germany were competing.

In 2005, the blacklisting of Denel on charges of paying bribes and kickbacks ended India’s tender to purchase 155mm/52 caliber towed guns. Denel had been the front runner. ■